Coinbase’s S&P 500 Addition Could Trigger $16B in Buying Pressure
Coinbase (COIN) soared by 16% early Tuesday following the announcement that it would be included in the S&P 500 index, a historic move for the crypto exchange.
Coinbase will officially join the S&P 500 index after the close of trading this Friday, replacing Discover Financial Services (DFS), which is being acquired by Capital One (COF).
Bernstein, a prominent Wall Street brokerage, predicts that the S&P 500 inclusion could generate around $16 billion in buying activity for Coinbase. Of this, $9 billion is expected to come from passive funds tied to the index, with an additional $7 billion expected from active funds reallocating their investments.
According to analysts led by Gautam Chhugani, Coinbase is the “first and only crypto company” to be included in the S&P 500. Chhugani has a positive outlook on the company, maintaining an outperform rating on its stock with a $310 price target, reflecting a 30% potential upside from its current price of $240.
KBW, an investment bank, estimates that S&P 500 passive funds will need to purchase 36 million Coinbase shares to incorporate the company into the index. This would represent approximately four days of average trading volume. Additionally, KBW noted that as of April 30, 9.9 million Coinbase shares were held short, or roughly 1.4 days’ worth of shares to be covered.
Historical data shows that companies added to the S&P 500 since 2017 have outperformed by an average of 5.2% on the day following the announcement, and Coinbase’s entry into the index could set a precedent for more cryptocurrency firms to follow.
